Quotes For Manufacturing- Not "Quotes"

Out of all the things I have experienced over the last five years of business start-up, quoting jobs has been the most difficult.

Of all the industries- is manufacturing the only game where we guess at the cost of manufacturing? For instance- if my truck dealer quotes me on a job(at 40-60$ more an hour than i can quote) and they go over- they dont eat that cost- that goes back onto the buyer.

If someone send you a rush quote- are they hoping you will rush through the quoting process-missing maybe one or two key features that will end up ducking you-in the hopes to gain cheaper pricing?

Target Delivery- is it safe to say that most people embellish the truth when they quote delivery-just to beat out other prospects to get the job-then end up two weeks late? also- is two weeks late even considered later? Seems like everyone I talk to is late- or waiting on someone who is late.

A quote is binding. An estimate is just an estimate.

Mark, that is true in the UK but is US law the same ?

Mark Rand said:

A quote is binding. An estimate is just an estimate.

Click to expand...

This, exactly.


If the customer is the sort that understands the tasks at hand and is cognizant of the variables, then we give them an estimate and let them have influence over the result. If it goes well, all are happy. If it goes sideways, they were warned and aware that it could have.

However, we have customers that require quotes, and they get them. And said quotes will ALWAYS favor _us_. Simply put, if I have to guarantee something that lacks having complete control over, then I am going to hedge my bets to favor a desirable outcome for the shop. For instance, WEDMing Tantalum to +/- 0.0002" for ten parts that have no set up parts supplied. You had better believe that I am going to quote that like it will be a major headache and I'll have to replace parts.

Or, being expected to give a hard quote to deliver parts on emergency basis within 36 hours. ( basically getting a call late on Monday, expecting parts in their hands on Wednesday ) This will get quoted like it will suck for us, even if it is a simple job that we've done before. ...because if it goes sideways, it is _my_ buttockal unit on the line... ( machine breaks, parts scrapped, etc... )

Really, the responsibility lies firmly upon us ( as the shop owners ) to drive the choice and practices. Not the customer. That's the way I've done it, anyway. So far, so good. We don't win them all, but we minimize our aggravations.

Mark Rand said:

A quote is binding. An estimate is just an estimate.

Click to expand...

And a "proposal" can be just the opening of negotiations to hopefully arrive at one of the other.

Or NOT.

Too many uncertainties to get any further on some tasking, first-go.

If any given entity is not comfortable in that zone and all the extra work it entails (think defense, shipbuilding, highways, airports, power utility bizness at the top-end, a basic bathroom or kitchen remodel at the lower-end).

"No bid" the job and seek more predictable work in your capability-set's comfort zone.

Costing and pricing is part of a capability set just as much as materials-mangling is.
Some focus on uncertainties, others, not so much. Do whichever you do best at.

Quoting custom machines is, in my opinion, about as bad as it gets. We have to 'guess' at the cost of manufactured parts before the DESIGN is even done, and do the same with design hours, assembly hours, runoff hours, etc.

I've personally been a designer on jobs (where I had zero input on the quoting process) that lost over 7 figures because of critical features that were missed, or just flat out misquoted.

That said, no one in the industry wants 'Time & Material' quotes either. I think the rationale is that we'll work harder if we're held to a quote.

allloutmx said:

Of all the industries- is manufacturing the only game where we guess at the cost of manufacturing? For instance- if my truck dealer quotes me on a job(at 40-60$ more an hour than i can quote) and they go over- they dont eat that cost- that goes back onto the buyer.

Click to expand...

There are others, but it's up to the individual business to determine how they do things. For example, the landscaper that did our new building ran in to a couple issues that they didn't charge for. I know for a fact every single of his competitors would have up-charged. And like most machine shops, we do not change pricing no matter what happens, good or bad, although I do occasionally send an updated quote for the next order if I missed it bad enough along with the first delivery.

If someone send you a rush quote- are they hoping you will rush through the quoting process-missing maybe one or two key features that will end up ducking you-in the hopes to gain cheaper pricing?

Click to expand...

Depends on the RFQ issuer, and you won't know until you have history with them. The trick is to stand by your guns. If you say you need 3 days to quote and they fuss about it, you tell them that you can either have an accurate quote done in 3 days, or you can have an estimate done in 10 minutes that is both non-binding, and has an added 200% safety margin built in. Stand your ground, or you will get walked on.

Target Delivery- is it safe to say that most people embellish the truth when they quote delivery-just to beat out other prospects to get the job-then end up two weeks late? also- is two weeks late even considered later? Seems like everyone I talk to is late- or waiting on someone who is late.

Click to expand...

This is a disturbing phenomenon. I've had people tell me that, of the shops in our area, we are the ONLY shop that delivers on time. This baffles me. We have a computer calendar that has each part number along with machine number for however many days we know it will take. We know when material and tooling will get here, we know how long the platers take, add 1 or even 2 weeks, and that's the delivery date. It's not difficult, and it's my opinion that anyone doing less to stay on time is being extremely disrespectful to their customers. Do what you say you are going to do. Simple.

Of course there's always machine break downs, sick employees, vendor issues, etc. That's what the 1-2 week fudge factor is for. And of course there are many jobs you won't be able to apply the fudge factor to and the job before it was a shit show. Ok, you are now late and can't do anything about it. In that case, as soon as you see the shit show start, you update the calendar as best you can, and tell all customers downstream of that what is going on immediately. And then you work 15 hours a day until its fixed.

Johnny SolidWorks said:

That said, no one in the industry wants 'Time & Material' quotes either. I think the rationale is that we'll work harder if we're held to a quote.

Click to expand...

In our customer's cases, it's because they are assigning a price to a product. If you fuck up your quote on the low side and have to requote, that means all the prices they promised to their end users (or whatever) is now bad. Now nobody is happy.

I have a new customer that is going through this. It's his fault for using the lowest bidder to start up his product line though. Now that those shops are out of business (go figure!!), he's finding out how much his stuff actually costs to make, and his customers are fucking pissed.

1. Note that for very many common tasks in automotive, there are 'standard rates' of shop time, materials, etc., that apply - and so some auto work is in fact quoted rather than estimated - but such work has often been done many many times before. Repairs like body work are much more variable.

2. The software industry's record on estimates, quotes, dates, sizes, and so forth is so bad that we used think we were the only industry that fouled up. Turns out this isn't true - construction has similar problems.

3. Advice above about estimates vs quotes vs proposals, make sure of what you are writing, and understand the relationship with the customer well.

4. Keep notes and build up data to be sure you can quote profitably. In the real world stuff breaks, people fall ill, and the power goes out due to weather. Try to keep some kind of average about how often that happens, and account for it.

You cannot compare making something from detailed drawings to fixing something you can't see.

Quoting for production work is no small feat. Once the number is in the hands of the customer, you are stuck with it, potentially for a long time. If you requote at a higher price, you risk the customer pulling all of the work. You have to make money, and compete with other shops.

From my experience, you get a feel for what the market will pay. Customer parts will often be very similar. It's unusual to quote a cast aluminum valve body for the same company that wants a bunch of drilled and tapped steel plates. Once you get a feel for the customer, it becomes much easier.

These days, everything is a "rush job". I'd plan to quote everything accordingly.

Being late is the result of everything being a rush job, and it's pretty much the norm. However, it's different to be late on completing an entire order versus late even getting them a single part. If a company orders 100 of something, it's unlikely they can use all 100 the second they arrive. Most companies are happy if you can feed them parts as fast as they use them.

One thing I learned the hard way was to tell people that unless I say "That is a quote." it isn't a quote. A lot of my work came through another shop and frequently salesmen there would guess at what I should be able to make something for and give a customer a price and delivery, then tell me I had to make it come true. I learned to say that they made a stupid promise so they could make it come true.

One of the worst was for designing and making an instrument that amounted to a mini dynamometer. Discussing it in what I thought were general terms, I said the units should cost around so much. That didn't include any design or development time. At that point, the design existed only as a sketch. The customer didn't show up at the meeting and after waiting an hour, I left. The customer showed eventually and the salesman gave him my number as a firm quote and made up a delivery time. I ended up making one unit and taking a very serious loss. If I made the two more they expected, I could not possibly have stayed in business. I got out of the mess in an odd way. The first machine worked so well that they didn't need the other two.

I never let a salesman represent me.

Bill

I put more effort into quoting than seems logical on occasion. Burned once, twice shy. After about 5 years I started getting good at it and can turn them around faster and more accurately.

If I get a bad set of prints or just a solid model I let the customer know the price is open to change based on new information. I won't allow anyone to pressure us into making a mistake on a quote. The same goes for when a PO comes in with a lead time that is shorter than we previously discussed.

If I get a revised print after the PO the phone call is made and the PO is increased to show the changes. I don't think it is necessarily intentional but it drives up costs just the same.

If you thought you would make it cheaper than you can and are losing money, that's just a part of the learning curve.

ewlsey said:

Being late is the result of everything being a rush job, and it's pretty much the norm. However, it's different to be late on completing an entire order versus late even getting them a single part. If a company orders 100 of something, it's unlikely they can use all 100 the second they arrive. Most companies are happy if you can feed them parts as fast as they use them.

Click to expand...

Yes feeding partials can work for some.

BUT for others, feeding partials is problematic. They may be plating, or as some of mine do Receive, Box and Ship. Partials become separate lots for plating costing a whole lot more...other customers have to send out extra shipments and that cost has been steadily rising and forget about freight costs.
We used to do alot of work for a Shipwright...it was make the deadline or ship sailed and we got to keep what we made. Jobs like those you make sure you have done on time or ahead of time.

Well if you don't want to get burned, you could give a not to exceed price and tell them you will charge for time and materials... Not sure how many of your customers would enjoy it though.

allloutmx said:

Out of all the things I have experienced over the last five years of business start-up, quoting jobs has been the most difficult.

Of all the industries- is manufacturing the only game where we guess at the cost of manufacturing? For instance- if my truck dealer quotes me on a job(at 40-60$ more an hour than i can quote) and they go over- they dont eat that cost- that goes back onto the buyer.

If someone send you a rush quote- are they hoping you will rush through the quoting process-missing maybe one or two key features that will end up ducking you-in the hopes to gain cheaper pricing?

Target Delivery- is it safe to say that most people embellish the truth when they quote delivery-just to beat out other prospects to get the job-then end up two weeks late? also- is two weeks late even considered later? Seems like everyone I talk to is late- or waiting on someone who is late.

Click to expand...

A quote is basically an educated guess, unless you can get a time and material job. Even that has its limits. Typically time and material would be a rush job, but if that part gets killed, for example, it wouldn't be right to charge the customer for the time you had in the dead part. In my opinion. Others feel, if you are working towards that part, they get charged for it.

Like others have said, for machine shops it seems a quote is binding. Basically the customer asks, can you make this part, and you say, I can make it for X. Sort of like buying a tool, if you were quoted $40 for a tool, but got charged $50 because xyz reasons, that'd be bad and not right.

I hate to admit it but the shop I work for has a lot of issues keeping to due dates. Even in our slower times, an onslaught of rush jobs causes us to get behind. Having folks work over is not good for them and puts even more strain on the payroll bill. Then when things are crazy busy, it seems that the ones doing quoting do not look ahead, and just quote every job like a standalone deal - not wondering about the 2 other big jobs they quoted earlier that day...

And around here, you can't hardly get work if you quote more than 2 weeks lead time. Only exceptions are big jobs.

But we keep getting work despite years of not delivering on time, which must mean either it doesn't matter, or everyone else is the same way... I wish it would stop.

If anyone knows how to keep a job shop with minimal repeat jobs to and on a schedule, that would be a thread for the ages...

SIM said:

We used to do alot of work for a Shipwright...it was make the deadline or ship sailed and we got to keep what we made. Jobs like those you make sure you have done on time or ahead of time.

Click to expand...

Yep been on the other side of that one when I was responsible for a lot of marine science equipment. A research cruise was often 3 years in the planning. If we needed stuff, we'd write the PO with a clause saying it had to be in our store by date X or you got to keep it. The ship was going to sail (absent more issues than I want to list) on the day and it wasn't waiting on a vendor.

One time the vendor had to air-freight the stuff & eat the expedited shipping & Customs clearance costs. They tried to get us to shift the delivery date - no.

PDW

AARONT said:

Well if you don't want to get burned, you could give a not to exceed price and tell them you will charge for time and materials... Not sure how many of your customers would enjoy it though.

Click to expand...

If there is trust and experience going both ways, this is the best deal for shop and customer.

Some absolutely must have a firm price, so we quote to cover all we can think of and then some. Add ons include, slow pay, pain to deal with, rush work, etc.

Paul

Job Shopper TN said:

If anyone knows how to keep a job shop with minimal repeat jobs to and on a schedule, that would be a thread for the ages...

Click to expand...

That's when you hire a lean consultant. I'm sure he has SEVERAL books he could share for you...

PDW said:

Yep been on the other side of that one when I was responsible for a lot of marine science equipment. A research cruise was often 3 years in the planning. If we needed stuff, we'd write the PO with a clause saying it had to be in our store by date X or you got to keep it. The ship was going to sail (absent more issues than I want to list) on the day and it wasn't waiting on a vendor.

One time the vendor had to air-freight the stuff & eat the expedited shipping & Customs clearance costs. They tried to get us to shift the delivery date - no.

PDW

Click to expand...

One time I worked on a monitoring system on a Mississippi River tug that was tied up at the arch. When I asked what would happen if I didn't get done on time. They said "Then I guess you will have to go to Memphis. You don't hold up the boat."

Bill

allloutmx said:

Out of all the things I have experienced over the last five years of business start-up, quoting jobs has been the most difficult.

Of all the industries- is manufacturing the only game where we guess at the cost of manufacturing? For instance- if my truck dealer quotes me on a job(at 40-60$ more an hour than i can quote) and they go over- they dont eat that cost- that goes back onto the buyer.

If someone send you a rush quote- are they hoping you will rush through the quoting process-missing maybe one or two key features that will end up ducking you-in the hopes to gain cheaper pricing?

Target Delivery- is it safe to say that most people embellish the truth when they quote delivery-just to beat out other prospects to get the job-then end up two weeks late? also- is two weeks late even considered later? Seems like everyone I talk to is late- or waiting on someone who is late.

Click to expand...

For me its all about collecting and utilizing data know what all your costs are rent/mortgage,utilities,wages,benefits etc know what it costs you every hour your open,the more data you collect the better you will be, and you can figure your break even hourly rate is.Then estimate your cutting time look over the print for surface finishes better than 32, true positions under .007 (works out to +/-.005)feature tolerances under +/-.0005 those cost more! do you need to build fixtures? and after you know all this your quote will be too high to win any work, its still a crap shoot. The nature of the business is to be right more than your wrong and with experience you will be.

allloutmx said:

Out of all the things I have experienced over the last five years of business start-up, quoting jobs has been the most difficult.

Of all the industries- is manufacturing the only game where we guess at the cost of manufacturing? For instance- if my truck dealer quotes me on a job(at 40-60$ more an hour than i can quote) and they go over- they dont eat that cost- that goes back onto the buyer.

If someone send you a rush quote- are they hoping you will rush through the quoting process-missing maybe one or two key features that will end up ducking you-in the hopes to gain cheaper pricing?

Target Delivery- is it safe to say that most people embellish the truth when they quote delivery-just to beat out other prospects to get the job-then end up two weeks late? also- is two weeks late even considered later? Seems like everyone I talk to is late- or waiting on someone who is late.

Click to expand...

If it is a rush job I say "Time and Materials take it or leave it". I have a customer who is well aware that a quote will cost him 3X. He may not like T&M but he knows it is fair and I am honest on the bill.